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3 tips to dramatically cut WIP and Lockup in your small accountancy firm

Do your accounts and bank statements show a widening gulf between your billings and what clients have actually paid? Even if that gap isn’t widening, it’s frustrating and stopping you from spending some of your hard-earned income. After all, there is nothing more frustrating than having a ‘paper’ profit and struggling to get money into your pocket from your firm.

It’s not just about not getting your cash out of the firm. Limiting your cash flow is one of the biggest barriers to growing your firm! If you’re suffering from any of the above, here are three ways to cut WIP and reduce lockup in your firm. 

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Cut WIP and lockup

The lower your firm’s lockup, the quicker your money will be available to you. Let’s start with the basics and then examine three tactics that Accountants have used to reduce lockup in their firms.

There are two things you can do:

  1. Bill more quickly (cut WIP – work in progress)
  2. Get paid more quickly (cut lockup)

OK, you know that. But how about this for extra motivation? The lower your firm’s lockup, the greater the capital value of your practice! 

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3 ways to cut WIP and lockup in your firm

a woman stressed to represent how to cut WIP1: Ensure your clients are never surprised by their bill

You have probably done this at home yourself. I know I have. I get a bill, and I know I have to pay it, but it arrived earlier than expected, or the amount is different from what I expected (even if it’s right). What do I do? I genuinely mean to pay the bill, but I need to make a phone call or check my facts…and then I will get around to it………eventually.

One common reason clients delay paying their bills is disputes over the amount. So ensure your client knows the invoice is coming and has already agreed to the amount; the bill will likely be paid promptly if you do this.

I almost hear you saying, ‘But they signed the engagement letter with that information’. Yes, but how many months ago? What could you do to smooth the client’s payment process with information?

  1. Get all your ad-hoc work agreed upon in writing (together with the amount, payment terms and date) so you will have fewer client surprises.
  2. Then, make a short phone call just before billing, which nearly always helps the bill get paid more quickly.

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a person paying by card to represent buyer behaviour2: Monthly billing and direct debit payments

Move your clients onto monthly billing so that you bill by splitting the annual compliance fees into 12 equal monthly installments. Now they’re paying up-front, and you are smoothing their cash flow (and yours).

Systems like GoCardless or Directli make getting paid by direct debit is easier than ever. Linking them with your cloud accounting system makes the process easier to manage than when you billed annually! Why muck about with standing orders or relying on clients generating the monthly payment when you can be in control of what your clients are billed and when via direct debit?

The switchover can be a large job if you have a large client portfolio, so it needs planning and thinking about the best way to approach it. With that being said, it can reduce your lockup to almost zero, so it’s worth doing!

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man using a claculator to represent how to cut WIP3: Bill more often

Nearly every firm knows this makes sense, but few actually do it. Why? Because they’ve never considered the size of the prize versus the small amount of changing their processes.

How many pieces of ad-hoc work do you take on? Ad-hoc jobs get missed and not billed for a long time in many firms, often waiting at least a month. (Read: 10 ways of getting your ad hoc bills paid quicker)

How can you adjust your weekly management process to ensure that all completed work has been billed and all work in progress is actually progressing? This is where you can really cut WIP.

Now consider your terms. You do not have to give clients 30 days to pay. Why not 14 days or make your payment terms even less?

An alternative is to adopt the “parking fine” approach, as some firms have. I call it that because I had a parking fine a few months ago, which was dramatically reduced if I paid within 7 days. How much would you discount your ad-hoc bill by if it were paid promptly?

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Unlock more profit!

In summary, reducing WIP and lockup in your firm isn’t just about improving cash flow—it’s about creating a smoother, more predictable income stream that frees up capital for growth. By ensuring clients are prepared for their bills, adopting monthly billing with direct debits, and billing more frequently, you can dramatically lower lockup and boost the financial health of your practice.

Why not book a call with one of our Growth Specialists to talk about how you could benefit from joining the Club?

We’re here to support our members to grow their accountancy practice.

With private coaching for our accountant members, exclusive masterclasses and a great community of accountants who help and support each other every step of the way, why not book a call to find out more?

It’s not a magic bullet, but if you are willing to take action, then joining the AGC could be the very best thing you can do for yourself and your practice. You don’t have to want to grow a £1million firm, just have the ambition to grow your firm in a way that works for you.